Financial statements represent the financial health and capacity of a particular company. Auditing is the art of calculation and in-depth analysis of the company’s financial information, precisely and accurately presented in accordance to the accounting standards and principles.
Almost all business entities including banks, finance companies, suppliers, insurance companies, especially the investors thoroughly check the financial capacity of a particular company, mainly because a huge amount of money is involved. As an investor or a business owner you, wouldn’t want to invest on a company that has low financial stability or worse a company that is about to close down.
These are some of the things why there is a need to hire a third party which is an auditing firm that would function as an arbiter without prejudice or bias to the parties involved. Audited financial statements are required by law as well, although companies also include it as a reason to satisfy clients, prospect investors, banks and many other entities.
An important thing to consider before hiring an independent or an auditing firm is careful evaluation. A well known auditing company doesn’t necessarily mean that they are already good in all the industry. It should be very well assessed that this company is well experienced and qualified to the industry your company is in.
Conducting a financial statement audit of a company can be very tedious. It may require careful observation and tracking internally including the past financial books and records. It may also include various strategies such as customer sampling or any other transactions involved outside the company.
Audited financial statements take time before completion depending on the company’s complexity and may take weeks or even months to finish. Auditing firms assure that the procedures are in accordance to the generally accepted accounting principles or known as GAAP. Two probable results may vary on the auditor’s inputs. It could be either favorable or unfavorable. A good result means that all the requirements were met. An unfavorable opinion means that it didn’t meet the auditor’s requirements. Possible reason would be that the reported statements do not accurately reflect the current standing or condition of the company.
Conducting an audit is a matter of carefully going through the whole process of planning, observation, and examination of financial records. Whenever a banker or an investor is going to need to evaluate a company’s accounts, they would most rather prefer to have statements accurately examined by professional auditors. Also, they would expect your firm to have knowledge about the company’s industry, and a good portfolio of credentials.